Learn how numerous South African businesses have taken remarkable steps to promote financial inclusion by implementing Earned Wage Access as an employee benefit
Bridging the Gap: How EWA Promotes Financial Inclusion in South Africa
Financial inclusion is a significant challenge in South Africa, where Treasury reported in 2023 that 3.6 million adults still don’t have access to financial services.
This issue is compounded by economic inequality, high levels of debt, and limited financial literacy. However, a growing solution known as Earned Wage Access (EWA) is beginning to make a substantial impact, offering a pathway to greater financial stability and inclusion for many South Africans.
Here’s how EWA promotes financial inclusion in South Africa.
Wait, What’s Financial Inclusion and Why is it Important in South Africa?
Financial inclusion means ensuring everyone has equal opportunity and access to quality financial products and services. This is achieved by making sure that every adult in the country can access financial products (an important factor, considering many people live in informal housing and domicile addresses are not always legally verifiable), and is educated about various products and how to use them effectively.
Achieving the highest possible level of financial inclusion is vital for the entire country. The World Bank has illustrated in numerous reports through the years that financial inclusion:
- Reduces poverty (Global Findex Report 2014)
- Empowers citizens (Global Findex Report 2017)
- Reduced inequality in society (Global Findex Report 2021)
Plus, researchers have known that financial inclusion leads to greater economic growth since as far back as the year 2000 (Beck et al. 2000). These are all extremely positive factors for our country, and goals worth striving towards.
The Challenges to Financial Inclusion in South Africa
Financial inclusion in South Africa is hindered by a range of factors, including economic disparity, lack of access to traditional banking services, and high levels of financial stress.
According to recent studies, a staggering 75% of South African employees live paycheck to paycheck, with up to 70% unable to pay their bills on time. This situation is exacerbated by the fact that many households are burdened with significant debt, often resorting to unsecured loans or loan sharks with exorbitant interest rates.
The lack of financial resilience among South African employees is alarming, with less than half having an emergency fund to cover unexpected expenses. As a result, financial stress is common, affecting not only employees' personal lives but also their performance at work – see how financial stress impacts productivity here.
This stress contributes to lower productivity, absenteeism and overall job dissatisfaction, creating a vicious cycle that traps individuals in a state of financial instability.
Addressing the Challenges: How EWA Promotes Financial Inclusion
Earned Wage Access (EWA) offers a powerful solution to the financial challenges so many South African employees face.
1. Immediate Access to Funds
EWA gives employees the ability to access a portion of their wages as they earn them, offering immediate relief for unforeseen expenses. This reduces the need for high-interest loans or credit card debt, which are common but costly alternatives for those in financial distress. By offering a more flexible financial solution, EWA helps employees navigate financial emergencies without waiting until payday.
See the complete guide to Earned Wage Access in South Africa.
2. Reduced Reliance on Predatory Lending
Predatory lenders often exploit individuals facing financial difficulties, offering quick cash at exorbitant interest rates. EWA provides a safer and more affordable alternative by giving employees access to their own money without the excessive costs associated with payday loans or other predatory financial products. This reduces the financial burden on employees and protects them from falling into debt traps.
3. Increased Savings
With access to their earned wages on demand, employees are less likely to dip into their savings for emergencies. This helps them preserve their financial cushion, allowing them to build long-term financial stability. Thus, EWA encourages healthier financial habits by reducing the need to deplete savings for unexpected expenses.
See how EWA reduces financial stress.
4. Promotes Financial Stability
EWA promotes overall financial stability by enabling employees to address financial emergencies promptly. Research has shown that employees using EWA experience less financial stress and greater control over their finances. For instance, 72% of employees report feeling more in control of their financial situation after accessing their wages early, demonstrating the positive impact of this benefit on financial well-being.
5. Available to Everyone on the Same Terms
EWA is designed to be financially inclusive, ensuring that all employees have equal access to this benefit, regardless of their financial background or credit history. It operates on the same terms for everyone, with a small, flat fee similar to an ATM charge – making it a fair and equitable solution for all employees.
6. Zero-Cost Benefit for Employers
Moreover, EWA is a zero-cost benefit for employers, making it an attractive option for companies looking to support their workforce without incurring additional expenses. Employers can implement EWA seamlessly through various providers, ensuring that the benefit is fully integrated with minimal administrative burden while maximising employee advantages.
Want to know how Earned Wage Access works? Check out our EWA FAQs page.
Success Stories of South African Companies Using EWA
Several South African companies have already witnessed the transformative impact of EWA on their workforce. For instance, Mukuru, a leading financial company, integrated Jem HR’s EWA to help employees manage financial stress. The result was a 96% reduction in HR time spent on loan processing and a significant decrease in employee absenteeism.
Similarly, Lasec Group, a supplier of scientific and laboratory equipment, implemented EWA and saw a drastic reduction in employee loan requests. This shift has saved their employees approximately R45,000 annually in loan interest, providing a clear example of how EWA can lead to tangible financial benefits for both employees and employers.
The Oryx Group, operating in the cleaning and hygiene services industry, also reported a dramatic decrease in absenteeism and improved financial management among employees after launching EWA. These success stories illustrate the potential of EWA to enhance financial inclusion and stability for South African workers.
See more real impact stories at South African companies.
The Future Potential of EWA in Promoting Financial Inclusion
From a 2022 JP Morgan report focusing on Earned Wage Access in South Africa, notable future trends to watch in this space include:
- Significant impact in underbanked communities, where EWA services support not only the individuals but also their broader communities over time.
- Cultivating a savings mindset to replace unchecked spending habits, especially when combined with financial literacy tools, such as those supplied by Jem HR in conjunction with EWA.
- Becoming a tool for talent retention and attraction, especially in segments of the workforce.
- Helping more people become bankable, specifically if one can build additional value-adds into the EWA offering, to have it function as a pseudo account of sorts in emerging markets.
- Promoting financial literacy through interactive and engaging experiences – Jem has taken some of the first steps toward this by introducing financial education tools alongside its EWA product.
Unlock the Benefit of Earned Wage Access for Your Employees
Ready to enhance your workforce’s productivity and well-being with Earned Wage Access. Jem HR makes it easy to implement EWA in your organisation.
